U.S. House committee launches probe of Allergan patent deal

Michael Erman

3 Min Read

NEW YORK (Reuters) - A U.S. House of Representatives committee launched a probe into drugmaker Allergan Plc’s (AGN.N) deal to transfer some of its patents to a Native American tribe to shield them from review.

The Allergan logo is seen in this photo illustration November 23, 2015. REUTERS/Thomas White/Illustration/File Photo

A bipartisan group of four representatives from the House Oversight and Government Committee, including Republican Chairman Trey Gowdy and top Democrat Elijah Cummings, sent a letter to the company on Tuesday saying the arrangement could “impair competition across the pharmaceutical industry.”

Allergan said last month that it was transferring patents on its dry eye medication Restasis to New York’s Saint Regis Mohawk Tribe, which agreed to exclusively license them back to the company in exchange for ongoing payments.

The representatives asked Allergan to provide documents about its agreements with the tribe, financial details about the drug covered by the patents and documents on whether the drugmaker is considering similar arrangements for its other drugs.

Allergan said it plans to cooperate with the committee’s requests.

The company’s shares closed down $1.18, or 0.6 percent, at $209.80 on Tuesday.

Allergan has argued that the legal maneuver is aimed at removing administrative patent challenges through inter partes review (IPR) by the U.S. Patent Trial and Appeal Board, and not challenges in federal court. The drugmaker said it believes that the patents should not be subject to the IPR process because of the tribe’s sovereign immunity.

The company still faces a challenge to the patents in federal court and has said that it does not plan to invoke the tribe’s immunity in federal court.

Still, some legal experts say the maneuver could also be used to protect patents from challenges in federal court as well.

Earlier on Tuesday, Allergan Chief Executive Brent Saunders defended the transactions as a proper way to shield the patents from the “flawed and broken” IPR process.

Saunders sent a letter to Republican Senator Charles Grassley and Democratic Senator Dianne Feinstein, the chairman and ranking member of the Senate Judiciary Committee, after four Democratic U.S. senators asked them to launch a committee investigation into the deal last week.

Allergan competitor Mylan NV MYL.N, which is challenging the patents through the IPR process, has called Allergan’s deal with the tribe a “sham transaction” and said the tribe should not be allowed to invoke immunity. The patent board has previously recognized the immunity of state entities such as public universities, and tribal immunity is considered by some to be an even stronger shield.